TIDMCOP
RNS Number : 6907E
Circle Oil PLC
12 February 2015
12 February 2015
Circle Oil Plc
("Circle" or the "Company")
Financial and Operating Update
Circle Oil Plc (AIM: COP), the Middle East and North Africa
focused oil and gas exploration, development and production
company, is pleased to provide an operating update for the
Company.
The recent fall in oil prices has had a substantial impact on
the sector and on market sentiment towards companies involved in
exploration and production activity. While Circle is not immune to
the impact of falling oil prices, the impact is somewhat moderated
by gas production in Morocco, where the Company continues to
benefit from stable pricing.
Financing Arrangements
Circle's existing financing arrangements include its Reserve
Based Lending facility (of which US$45 million has been drawn down
to date) and a US$30 million Convertible Loan ("Convertible Loan")
due for redemption in July 2015. As at 31 December 2014, Circle had
available cash of US$34 million. The Company continues to fund its
operations from operational cashflow as well as leveraging its
existing financing arrangements.
In advance of redemption of the Convertible Loan the Company has
engaged in detailed discussions with KGL Investment Company ("KGL")
and it is pleased to announce that Heads of Terms have now been
agreed in regard to amending and extending the Convertible Loan.
Further details are set out in a separate announcement due to be
released today.
Approval of the proposed amendment and extension would extend
maturity of the Convertible Loan until at least July 2017 and
enhance Circle's overall operational and financial flexibility. In
tandem with this refinancing and mindful of ongoing oil price
volatility, Circle, is reviewing its cost base and capital
commitments to ensure it is optimally placed to mitigate the impact
of ongoing oil price volatility.
Egypt
Production in the Al Amir SE ("AASE") and Geyad fields continues
in line with previous guidance at 9,100-9,200 bopd (gross) and
approximately 10 MMscf/d of gas (gross).
The annual work programme is close to being finalised and is
focussed on maintaining the current production levels throughout
2015. The programme includes the drilling of three wells during the
second half of 2015. Two of these are planned as producers, one
each in the AASE Field and Geyad field and an additional injector
well in AASE aimed at providing further pressure support to the
AASE reservoir.
The Company continues to receive regular payments from EGPC, in
line with expectations. In addition the recently announced payment
of US$15 million has significantly reduced overall receivables.
This was a welcome result in line with the published Egyptian
Government intention to pay down its oil and gas related debts as a
precursor to encouraging further investment in the Egyptian energy
industry.
Morocco
Following the successful testing and completion of the KSR-12
well, Circle is pleased to confirm that it has spudded the KAB-1bis
well in the Sebou Permit, onshore Morocco, the fourth well in the
twelve well campaign.
As previously indicated heavy rains have prevented access to
part of Circle's northerly permit of Lalla Mimouna, so as to avoid
delay, the rig was moved and set up to drill the KAB-1bis well on
the Sebou Permit. Although further modifications to the drilling
sequence may be required due to weather and ground conditions, the
rig is scheduled to move to drill Circle's first wells on the Lalla
Mimouna permit, following completion of the KAB-1bis well.
This well is located downthrown to the NW-SE trending N'zala
Fault in the north western area of the Sebou 3D survey. The
KAB-1bis well is a redrill of the 2011 KAB-1 well, in which gas
shows were observed but problematic swelling clays created borehole
instability and the well could not be logged or tested. KAB-1
encountered good gas shows in the target Miocene top Guebbas sands.
KAB-1bis has the same target with an adapted mud system to minimise
drilling problems in a slightly more updip location. The primary
target Guebbas sands are prognosed at a depth of 1,272 metres MD
and the TD of the well at 1,360 metres MD. The Company regards this
well as lower risk due to the fact that a specially adapted
drilling mud to assist with the drilling is being used and the fact
that good gas shows were encountered in the first drilling run.
Daily production from the Sebou permit continues at 6.5 - 7
MMscf/d (gross) in line with previous guidance.
With the continued success of the current drilling campaign,
which has initially enabled the replacement of depleted reserves,
Circle is now adding to its overall total reserve base. As the
Morocco drilling campaign continues, the Company anticipates being
able to increase its sales of gas incrementally to both existing
and new customers over the next two years. Local demand for natural
gas remains strong and the Company continues to benefit from good
pricing, contract terms and the overall fiscal regime.
Tunisia
Mahdia Permit
The process is underway for Circle to renew its permit for a
further three years.
Post drill studies on the Mahdia well have continued including
full geological analysis. Data has been prepared and is being made
ready for marketing with the intention to commence farm-out
discussions with interested parties in the near future.
Ras Marmour Permit
Circle continues to await final confirmation of all approvals to
drill the onshore Ras Marmour well. The prospect Sedouikech-1 is
targeting a productive sand in the Early Cretaceous Meloussi sand
formation which is the proven reservoir in the adjacent Robbana
field.
Beni Khalled Permit
Tenders are currently being evaluated in respect of the 3D
seismic for Beni Khalled. Management are studying these in the
context of both existing agreements and pricing to ascertain
whether there is advantage in postponing the award of the tender to
obtain better pricing. However any course of action undertaken will
be designed to have minimal impact on the overall timetable of the
project.
Oman
Oman Block 49 -Exploration Well Shisr-1
Circle is pleased to also announce the start-up for drilling of
the well Shisr-1 in Block 49, onshore Southern Oman.
The Shisr-1well is located in the south east area of Block 49
onshore in the Dhofar Province of southern Oman. It lies on the
northwestern dipslope of the north east trending Ghudun High and
updip of the Dauka-1 well in the central area of the Block 49 3D
survey.
The proposed well targets two vertically coincident seismic
anomalies. Both targets are potentially oil-bearing Haima Group
sands of Ordovician age. The prospective trap is a combination of
stratigraphic pinchout onto the Ghudun high and downdip structural
closure. The primary target Hasirah sands are prognosed at a depth
of 1,890 metres MD and the secondary target Ghudun sands are
prognosed at a depth of 2,420 metres MD, with the TD of the well
prognosed at 2,550 metres MD. The well has an expected drilling
duration of six to eight weeks to reach TD without including any
allowance for possible testing. The completion of the well fulfils
Circle's obligations in respect of this block. As has been stated
previously, management views this as a high risk commitment well
with a low possibility of success.
Oman Block 52 and other
The Company continues to seek a farm-in partner for the offshore
Oman Block 52 The downturn in world oil prices is providing an
added challenge to achieving its objective.
As previously noted the Company has bid for an exploration block
in the previous Omani bid round and updates will be provided in due
course.
Management Changes
In tandem with these operational developments, the Company's
Board has continued to evolve with a focus on broadening experience
and expertise.
Key recent changes have included the appointment of Susan Prior
as Group Finance Director in January 2015. In addition, the
appointments of David MacFarlane and Antony Maris as Non-Executive
Directors have provided additional sector experience to the
Board.
The search for a new Chief Executive Officer to replace
Professor Chris Green is well underway and will be the final step
in completing the new Board.
Chairman Steve Jenkins commented,
"Circle continues to perform well in what is a challenging
environment for oil and gas companies. This has been partially
mitigated by favourable, stable gas pricing for our Moroccan gas
production and the improved payment schedule in Egypt. Steady
progress is being made on all our licence areas which includes a
continuous, exploration drilling campaign in Morocco and
development drilling in Egypt. Corporately, we are taking the steps
needed to ensure the future growth of the business, widening and
strengthening the skill set of the board and ensuring we have
sufficient financial resources to allow the company to grow to its
full potential".
Glossary
bopd Barrels of oil per day
MD Measured Depth
MMscf/d Million standard cubic feet of gas per day
TD Total Depth
For further information contact:
Circle Oil Plc (+44 20 7638 9571)
Steve Jenkins, Chairman
Investec (+44 20 7597 5970)
Chris Sim
George Price
James Rudd
Liberum Capital Limited (+44 20 3100 2222)
Clayton Bush
Citigate Dewe Rogerson (+44 20 7638 9571)
Martin Jackson
Shabnam Bashir
Murray Consultants (+353 1 498 0300)
Joe Heron
Pat Walsh
In accordance with the guidelines of the AIM Market of the
London Stock Exchange, Dr Stuart Harker, VP Geology, with over 40
years experience, is the qualified person as defined in the London
Stock Exchange's Guidance Note for Mining and Oil and Gas
companies, who has reviewed and approved the technical information
contained in this announcement. Dr. Harker holds a BSc (Hons) in
Geology from the University of London (UK) and an MSc and PhD from
the University of Saskatchewan, Canada. He is also a Fellow of the
Geological Society of London and a Chartered Geologist. Dr Harker
has relied on primary information supplied by the operator in
carrying out his review.
Notes to Editors
Circle Oil Plc (AIM: COP) is an international oil & gas
exploration, development and production Company holding a portfolio
of assets in Morocco, Tunisia, Oman, and Egypt with a combination
of low-risk, near-term production, and significant upside
exploration potential. The Company listed on AIM in October
2004.
Internationally, the Company has continued to expand its
portfolio over the past years and now has assets in the Rharb
Basin, Morocco; the Ras Marmour Permit in southern Tunisia; the
Mahdia Permit offshore Tunisia, and the Zeit Bay area of Egypt.
Circle also has the largest licensed acreage of any company in
Oman. In addition to its prospective Block 52 offshore, Circle has
an ongoing exploration programme in Block 49 onshore.
Circle's strategy is to locate and secure additional licences in
prospective hydrocarbon provinces and, through targeted investment
programmes, monetise the value in those assets for the benefit of
shareholders. This could be achieved through farm-outs to selected
partners who would then invest in and continue the development of
the asset into production, or Circle may opt to use its own
expertise to appraise reserves and bring assets into production,
generating sustained cash flow for further investment.
Further information on Circle is available on its website at
www.circleoil.net.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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